Fri June 1, 2012

Is Michigan Rebounding? Depends Who You Ask

This election year we've seen a lot of cases where different people look at the same economic situation and come to different conclusions. And that seems to be happening in Michigan. It's America's comeback state - that according to its governor, Rick Snyder. Unemployment there is dropping, as the U.S. auto industry rebounds. And the state has a budget surplus for the first time in years.

But many local leaders say they're not seeing any comeback. They say state leaders are mostly helping themselves and the business community. Michigan Radio's Sarah Cwiek reports.

SARAH CWIEK, BYLINE: Things have been bad in Michigan for a long time. Before the rest of the country fell into recession, this state dealt with kinds of budget problems other states have only recently encountered. Dan Gilmartin is CEO of the Michigan Municipal League. He says Michigan's state and local governments have historically had a strong, cooperative relationship. Gilmartin says unlike in many other states, Michigan has streamlined things like sales tax collection at the state level, then distributed those funds for local governments to fund their own services.

DAN GILMARTIN: In the past decade, when we've gotten into the financial problems and the state's gotten into the financial problems it has, they've basically raided those funds to the tune of about $5 billion. With a B.

CWIEK: And Gilmartin says that shortchanging has had very real, visible consequences.

GILMARTIN: We now have 3,600 less police officers on the street in Michigan today than we did on 9/11.

CWIEK: Now that the state economy is rebounding, local leaders were hoping some of that money would flow back into city coffers. But instead, they continue to face deep cuts. Many local leaders are especially steamed over a new proposal to phase out a long-standing tax on business equipment, a critical source of revenue for them.

Michigan's fourth-largest city, Sterling Heights, is a largely residential suburb a few miles north of Detroit. Like many of Michigan's larger cities, it's heavily dependent on industry. That's evident here along this stretch of 18 Mile Road, which is lined with industrial businesses, including a Ford plant - one of four big auto factories in the city.

Richard Notte is the mayor here. He says while the city is in better fiscal shape than many Michigan cities, it will be hit hard if the state does away with the personal property tax, which largely amounts to a tax on industrial equipment. This year, Notte had to do what used to be unthinkable: cut police officers and firefighters. He says any more cuts will be scraping bone, and if state leaders follow through on their proposal, the city will be in even bigger trouble.

CWIEK: State officials have assured local leaders that they'll make up most of the lost revenue in other ways. But as of yet there's no guarantee that will happen. And many local leaders are skeptical.

Michigan Governor Rick Snyder says he's sympathetic, but he insists repealing the personal property tax is about doing away with a barrier to investment in manufacturing.

GOVERNOR RICK SNYDER: Here's a replacement revenue stream, so you can bring more jobs to your community, you can grow more, and you can prosper.

CWIEK: But some analysts doubt that getting rid of the tax will create many jobs and say it will only really help big companies like Detroit's automakers. The Michigan Municipal League's Dan Gilmartin says providing the state's residents and businesses with a good quality of life is really the only way to ensure a solid comeback.

GILMARTIN: If we continue to disinvest the way that we've been doing, you know, it doesn't matter what our tax rate is. It could be zero and we're not going to be able to compete. So the state needs to accept that challenge.

CWIEK: While Governor Snyder insists he does want to partner with cities, many of those cities' leaders see this personal property tax debate as a litmus test for just how serious Michigan is about re-investment. And everyone's eager to see just when the state's rebounding economy will make its communities better places to live.